Price of palm oil predicted to leap

Palm oil futures in Malaysia may advance as much as 15 percent during the next year because of rising demand and a shortfall in supplies of vegetable oils, Dorab Mistry, a director at Godrej International, said Sunday.

Prices might climb to up to 3,000 ringgit, or $870, a ton in the year ending Sept. 30, 2008, Mistry said during a conference in Goa. Earlier this year, he had predicted that prices would surpass 2,500 ringgit this year. Mistry has traded vegetable oils since 1976.
Vegetable oils are increasingly used in biofuels as crude oil prices have tripled to a record in five years. U.S. farmers have planted more corn to meet demand for ethanol, pushing sowings of soybeans to a 12-year low. Malaysia and Indonesia account for about 90 percent of palm oil output.

Palm oil on the Malaysian Derivatives Exchange, which trades the global benchmark, touched a record 2,764 ringgit on June 6 and has averaged 59 percent more since January than a year ago. The most active contract gained 1.4 percent to 2,606 ringgit on Friday. Soybean oil, palm oil’s main competitor, reached a 23-year high of 40.49 cents on Tuesday.

Demand for vegetable oils in the year to September 2008 may rise by 5 million tons, while supply may increase by 3.9 million tons, Mistry said. The incremental demand includes two million tons for biofuels and three million for food purposes, he said.

Not all traders are backing Mistry’s price outlook.

International Herald Tribune